New defeat for Spain in the battle for cuts to renewables. The International Center for Settlement of Investment Disputes (ICSID), an arbitration body of the World Bank based in Washington, has refused to annul the award by which it ordered Spain to compensate Infrared with 28 million euros. In a decision dated June 10 to which EL PAÍS has had access, the arbitrators dismissed Spain’s request. Infrared, meanwhile, has started proceedings before the courts to try to collect compensation.
The court’s decision rejects the key arguments that Spain is using to request the annulment of the multimillion-dollar sentences that it has been suffering in the different arbitrations. Even so, the decision of one court is not binding on the next and there are some contradictory rulings under similar circumstances. All in all, Spain adds sentences for some 800 million, part of them firm.
Represented by Cuatrecasas, the British company InfraRed Environmental Infrastructure GP Limited sued Spain in June 2014. InfraRed had taken a stake in two solar thermal energy projects in Spain in September 2011: those located in Morón de la Frontera (Seville) and in Olivenza (Badajoz), both of 50 megawatts and parabolic technology. Its entry occurred before the start-up of the plants, which were built by Acciona and Idom. At the time of the announcement of the participation, InfraRed assured that it would provide more than 500 million euros of financing through capital and debt. Infrared Capital Partners, to which that fund belongs, is a firm with more than 12,000 million dollars in assets under management.
The General Attorney of the State had brought out all its legal artillery to request the annulment of the award issued on August 2, 2019. It alleged that the arbitrators of the initial procedure had exceeded their functions “by granting protection to investors without clean hands (…) and confer protection to those who had acted on the basis of deception and fraud in their investment process”.
Spain also argued that the Court effectively “manifestly exceeded its powers by going beyond its jurisdiction” by taking on a case between an EU company and an EU Member State, in its view breaching Community law. That is one of the star arguments of Spain, supported by community doctrine, but with which the arbitration courts do not feel linked. The non-application of EU law, the incorrect application of the rules and the error in calculating compensation were the other arguments with which Spain considered that the arbitrators had exceeded their functions.
Spain also argued the lack of expression of reasons or justification in different aspects of the award and violation of the procedure for violating the principle of the burden of proof and the right of Spain to be heard.
He knows in depth all the sides of the coin.
The “parrot effect”
Infrared, for its part, refuted the Spanish arguments. And, the court agrees with him, one by one, in all the supposed grounds for annulment alleged by Spain. “All the arguments raised by Spain and the Commission do not convince the Committee that the Court exceeded its powers, much less in a manifest way,” says the committee that has analyzed the case in its ruling, referring precisely to that argument. that intra-community disputes should not be submitted to international arbitration.
The arbitrators emphasize that, despite the support of the European Commission for Spain in this regard, the arbitration courts have been systematically rejecting this argument. Spain attributed it to a “parrot effect”, according to which the arbitrators of the arbitration courts keep repeating the same argumentation without studying it in depth, something that the committee does not seem to have liked very much: “Stating that all those decision-making bodies could not discerning the arguments against jurisdiction lacks common sense.”
In their 199-page brief, the arbitrators dismantled the Spanish arguments one after another until reaching a unanimous conclusion: “The request for annulment of the award is dismissed in its entirety.” Spain not only has to pay the compensation originally set and its interest, but also, due to this annulment procedure, it has assumed costs of 1.3 million and has to pay another 343,000 euros to Infrared, 50% of the fees for their lawyers.
Even before the committee rejected the award’s annulment last week, Infrared had already started legal action in the United States to try to collect the debt. In general, the courts were keeping in abeyance those petitions to seize assets from Spain while the award was not final. Now, with the annulment attempt having been rejected, the case can be reactivated in court.
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